What to know about trading forex using price action
July 30, 2008 – 9:55 pmIf you’re curious about getting a deeper understanding of how to trade the forex markets, you’re going to have forget about all those lagging indicators that you’re using.
Indicators such as MACD may look great on the charts, but you’d be hard pressed to find anybody who can use it to get a deeper understanding of the markets.
I’m positive we all know how to use an MACD indicator, but what does it mean to the overall price movement and direction of the market? Most don’t really know.
While these kind of indicators may seem like a fast way to learn the markets, the truth is you’re not really learning anything about the market. You’re just using an indicator as a translator. The translator is the indicator interpreting the market and reading it back to you. This may seem like a great thing, but it is doing you a great disservice.
There is no need for a translator. You have to fill those shoes. Let’s say you were moving to a Spanish speaking country for a year. Wouldn’t you take the time to learn Spanish before you got there? (After all, you’re spending an entire year there). I’m sure you can find some body who speaks English there, but do you really think you’re going to enjoy the local culture if you never bother to learn the language? Of course not, and it’s no different in forex. The only difference is that the language that is needed to be learned is price action.
If you want to learn this language, the first thing you need to do is go to the charting system you use and get rid of every single indicator you have on them. Then pick your favorite currency and watch all the price movement for the day.
I know this may not seem like you’re going to learn anything, but you are. You are going to be able to see that price patterns get repeated and pretty soon you?ll be able to forecast future price movements.
If you don’t really think its possible to do this, then research the name Jesse Livermore. Livermore became rich in the early 20th century by just trading on the market floor. All he used was the price action from the other traders on the floor to base his trading decisions off of.
Tags: Currency Trading
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